Spouses – also called “married-ins” – can be a boon to the family business. Or they can be a nightmare.
Danielle Saputo, a family enterprise advisor in Peterborough, Ont., frequently works with clients who have a mess on their hands. Often what happens is the family business allows a family member’s partner to join it, and that individual dramatically increases their power and stake, much to the dismay of the family.
“It can be very difficult for families when there isn’t clarity” on this issue, she says. “It causes rifts in families – just coming together for Thanksgiving can be an issue.”
One way to prevent this scenario is drawing up a policy that prevents participation by in-laws. Another is carefully crafting a family business constitution that expressly outlines the roles of married-ins and the financial compensation they might receive.
This document, ideally drawn up with the help of an advisor or family office, should set out an individual’s decision-making power, whether they should own shares, what qualifications they need to play a role, and what kind of role they will have. It should be revisited annually, says Saputo, who is also a member of the Montreal-based Saputo family, which founded Saputo Inc., one of the top 10 dairy processors in the world.
The split between families who allow in-laws into the business and those who don’t is about 50/50, Saputo estimates. She also has observed a recent push to include in-laws in the business.
The biggest question for the family business then becomes: “When and how do we get them involved?” she says.
“There’s always pillow talk that happens,” says Saputo. And that necessitates discussion of a spouse’s role in the business as early on in the marriage as possible, says Saputo.
Factors to consider
Here are some factors that should be addressed:
Transparency. Families need to go on “an educational journey,” says Saputo. That means ensuring that every family member, whether immediate or married-in, knows exactly how the family stands on issues regarding outside involvement in the firm.
A patriarch or matriarch might stipulate, for instance, that everyone will be listened to, but decision-making will be carried out only by immediate family members, Saputo says. Regardless of the business’s position, it should be disclosed and discussed with the whole family to prevent unpleasant surprises later for married-ins.
A frank discussion of ownership. Mohsin Adhi, a family business consultant in Mississauga, Ont., works within Muslim communities, which frequently look to male in-laws to take over their businesses. He works with these families to draft provisions that accommodate these married-in family members in the family business’s constitution.
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“If they are to be given an executive role, there should be rules around shareholding,” Adhi says. For example, shareholding might be granted only to children of the first-generation owners, and the person taken on board might not have any share ownership, he says. Or a different class of shares can be bought that don’t give the individual ownership but still provide them with a form of compensation.
Clearly defined expectations. If a family business decides to allow married-ins to participate in the business, and they are expected to hold senior roles, then any education and training requirements should be made clear to them, Adhi says.
For example, “if someone is working in product development, they should be asked: ‘What products have you developed?’” he says. “They should be held accountable or the company could suffer.”
But Saputo warns against using a boilerplate document that fails to reflect the unique needs of the business. She suggests hiring a “champion” of the business to craft the policy – this would be a family member who has won everyone’s trust and plays an active role, or a family enterprise advisor who knows the family well. Generic language in an in-law policy can lead families to ignore it, rendering it useless.
External help. When emotions run high, as they can in family businesses, an external advisor can help bring calm and a sense of control to the situation, ensuring that the opinions of family members are heard and included in the policy.
Frequent reviews. Adhi suggests families review their policies annually to ensure they still meet the needs of the business. “A family is always growing and the dynamics are changing,” he says.
The process of drafting an in-laws policy can bring a lot of clarity and structure to an otherwise challenging business arrangement.
“Growing a family business requires professionalism, policies and a clear vision,” says Adhi, “which should unanimously be followed by the whole family.”
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